1In the current economy, there is a slight but noticeable increase of the short-term rates (1-year) over the long-term rates (10-years) on US Government debt, so the yield curve is regarded as modestly rising.If such an environment continues, which of the following is TRUE:

a.ARM interest rates will be about the same as for fixed-rate mortgages.

b.Borrowers might want to wait for the yield curve to invert before "locking in" the low short-term interest rates by taking out an ARM.

c.If you borrow using an ARM, your interest rates are more likely to rise than fall in the future.

Fixed-rate mortgages with a shorter term, of say 5 years, still have higher interest rates than mortgages with longer terms, such as 20 years

2Your friend has a trust fund that will pay him $500,000 at the end of 10 years.Your friend, however, wants his money today!He promises to sign his trust fund over to you if you give him some money right now.You wisely require a 20% interest rate on money you lend to friends.How much would you be willing to lend under these terms?

a.$80,753

b.$250,000

c.$1,000,000

d.$0it would be impossible to earn 20% interest on a loan to my friend because...